5 days ago
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RenaissanceRe, the Bermuda based reinsurance company and third-party capital manager, has returned to the catastrophe bond market seeking $250 million or more in multi-peril retrocessional from a Mona Lisa Re Ltd. (Series 2025-1) issuance, to cover risks in its own portfolio and that of its flagship partner capital vehicle DaVinci Re.
This will be the sixth Mona Lisa Re Ltd. catastrophe bond from RenaissanceRe (RenRe).
The reinsurance company is looking to expand its cat bond coverage across the same range of perils to its previous Mona Lisa Re deals, with two tranches of Series 2025-1 cat bond notes set to be issued and sold to investors by Bermuda-based Mona Lisa Re Ltd., Artemis has learned.
The proceeds of the sale of the notes will be used to collateralize retrocessional reinsurance agreements between the issuer Mona Lisa Re Ltd. and the ceding companies, RenRe itself and its third-party investor capitalised, equity-backed but balance-sheet sidecar-like company DaVinci Re.
As we reported the other day, DaVinci recently received a ratings upgrade from Moody’s.
This Mona Lisa Re 2025-1 catastrophe bond will provide the two ceding companies with retrocession across both three and four year terms, with the coverage for both tranches incepting at January 1st 2025, but one running to the end of 2027 and the other to the end of 2028, we understand.
The coverage will provide retrocessional protection against losses caused by U.S., Puerto Rico, U.S. Virgin Islands, and D.C. named storm and earthquake events, as well as protection for Canadian earthquakes.
The cat bond will feature an industry loss index trigger, with PCS the reporting agency across personal, commercial and auto line losses. The two tranches of notes will provide annual aggregate retro reinsurance to RenRe and DaVinciRe across the three and four year terms, while there will be a franchise deductible of industry loss index points enforced per-event.
The Class A tranche of notes are targeted to provide $125 million of protection and will offer four years of retrocession. They will have an initial attachment probability of 4.16%, an initial expected loss of 3.66% and are being offered to cat bond investors with price guidance in a range from 8.5% to 9.25%, sources said.
The Class B tranche are a little riskier and also target $125 million of protection for the sponsors, but for the three-year term this time. They will have an initial attachment probability of 5.63%, an initial expected loss of 4.84% and are being offered to cat bond investors with price guidance in a range from 11% to 11.75%.
For comparison, the Mona Lisa Re Ltd. (Series 2024-1) catastrophe bond that was sponsored in June this year was less risky, but had an initial expected loss of 2.22% at the base case and priced to pay investors a spread of 9.75%, so a multiple-at-market of 4.39 times EL.
While the Mona Lisa Re Ltd. (Series 2023-1) catastrophe bond featured a Class A tranche of notes that provided aggregate coverage and had an initial expected loss of 2.25% and priced to pay investors 12.25%, so a multiple-at-market of 5.44 times the EL.
As a result, it appears these two new Series 2025-1 tranches of cat bond notes from Mona Lisa Re could pay a far lower multiple of expected loss to investors, with around 2.7 times EL indicated at the mid-point of guidance for the Class A notes and 2.35 times EL indicated at the mid-point for the Class B notes.
With investor appetite for new catastrophe bonds elevated at this time and cat bond funds keen to source new and longer-duration paper, it will be interesting to watch where this new cat bond from RenaissanceRe settles.
You can read all about this Mona Lisa Re Ltd. (Series 2025-1) catastrophe bond from RenaissanceRe and every other cat bond ever issued in our extensive Artemis Deal Directory.
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